Here is the story.\ NEW YORK, Aug 9 (Reuters) - NovaStar Financial Inc (NFI.N: Quote, Profile, Research), a mortgage lender, posted a quarterly loss of more than $50 million on Thursday after writing down the value of home loans on its books. The Kansas City, Missouri-based company said its second-quarter net loss available to common shareholders was $54.5 million, or $5.84 a share, compared with net income for common shareholders of $33.1 million, or $3.97 a share, a year earlier. A incredible 5.84 per share loss!!! Also of note is.\ From June 30, 2007 through August 8, 2007, NovaStar has been subject to margin calls of approximately $76.5 million due to the extremely volatile and less liquid secondary market, which has adversely affected the value of its mortgage securities and mortgage loans. That is 76.5 million bucks of margin calls in just a little over a month!!! Wachovia is their wharehouse lending connection. With only about 80m in cash left, the very next margin call will do them in ala like AHM!!! With surmounting losses and margin calls that are only to get worse, shorting or buying puts on this subprime mortgage lender that is next in line for the auction block behind AHM is a safe bet! Down 7% after hours and will be much worse tommorrow morning. You can still get cheap puts, do so or short this pathetic, bankrupt co. to oblivion. Delisted and on the pinksheets(LIke AHM, and NEW, now AHMIQ.PK and NEWCQ.PK) whithin the next week.
Now down to 5.01 AH! That's .52 already!!! Better get in and short or buy puts, you'll miss out. Bankruptcy is just around the corner.
WOW to think this thing was on the way to recovery busting through double digits when everything was all roses a few weeks ago time to break out the shovels! AHM, LUM, NFI... CFC we're coming for you
Here is my Midwestern view of Novastar. I think NFI management is quite smart. Although, they are having problems with margin calls and write downs, they have secured large credit lines and losses are so far unrealized. For example, I am not particularly worried about my large paper loss in QUA.TO today. Part of the credit meltdown problem is that the one size fits all GAAP and MREIT accounting rules can't deal with hedge fund and politician's greed. I think Europe is correct in seeing the current "bank run" on enterprises that need day to day credit as similar to the 1930s worldwide situation. This time the run is on mid size businesses (maybe equivalents of the small town banks of the 1930s in the US). If the credit system is really frozen, all Wall Street companies are the best short sales ever. I have a tendency to see the world in terms of art so I think the current NFI problems (all MREIT's actually) are similar to the circumstances in the movie "The Great Northfield Raid". No populist housing and chance for economic betterment for the US middle class.
Although you sound like you do not realize that NFI is in it's final days and the losses ARE REALIZED, I still agree with your sentiment that the people this will hurt most is the middle class. Perhaps now folks will wise up to predatory lending practices. The disaster was several years in the making and I have had my head shaking at it the entire time. You can not give loans out to people that can't afford them and stay in business. The sector got out of control and it came down to who could write the most loans and make the most commissions. Who cares about the bottom line, let's write more loans and make the money now. The subprime lenders where just used car salesmen, total scumbags. The real stupidity here is all the institutional banks buying these second class high risk mortgage bonds. I wouldn't have gone near them, however Merril, Goldman, Well Fargo and the like bought them like crazy. Now they to will pay the price. Anyone that is a non-bank mortgage lender is\will go bankrupt. The institutinal banks will take a huge hit(most where down 6-10% today) and the situation is going to GET MUCH WORSE. Hang Seng down almost 400pts. It will be a black Friday the shakeout has begun, the situation is beginning to be exposed and finally folks are starting to realize just how bad things are. No more cover ups, the truth is coming out. NFI will sell off drastically today. The losses are $5.86 per share and the share price is $5.01!!!! That is .85 cents more than the price of the shares itself! Going to tank like AHM(now AHMIQ.PK) and LUM did. Say goodbye to NFI, they are the next subprime lender to go!
Pure market manipulation. No volume for the first 2 hours of the day and then some one bought right before reserve announcement. It makes no sense. Top researchers say NFI is the next to go after AHM. Riskmetrics, the most respected name in the field says the same thing. If this the bounce before bankruptcy? Anyone else done research on this pathetic co? What is you take on the matter? I just can't see how a stock that opened this morning to where the loss per share(5.87) was more than the PPS itself and the stock up a bit. Any care to comment. what is you long term outlook. Replies and opinions are welcome.
As I see the option chain right now, you can buy Jan08 $5.00 calls for $0.45, and the stock is selling for $6.28!! Am I seeing this right? Theres almost a dollar difference there..
There was a reverse split of 4-1 2 weeks ago. The value of this stock right now is about $1.50. I took a hit on this stock when I thought it was getting bought out. I sold the day it reversed split as that is the kiss of death.
no, yeah the value now includes the stock split, the stock went to $13 after the split, but again came back to the $5-6 level. As far as i know, split doesen't change a thing, the options also move along with the split and show it... NFI has the weirdest option chain I have seen in a while, a lot of near term options are expensive, but you go out 6 months and they are dirt cheap..I am not that experienced so don't know whats going on! Is this a pure arbitrage play?